It looks like the true music pirates, otherwise known as the recording industry, have finally seen the light and are being forced to reasses their rip off of the public in order to get their business. $10 CD's is a good start. CD Prices Cut as Napster Blues Play On NEW YORK, Dec. 28 — U.S. shoppers may think they have seen enough bargains this holiday season, but CDs at $9.99 may soon be a standard offer at music stores as retailers slash prices in bid to battle the scourge of online music piracy. SO FOR STUDIOS, artists and retailers alike, 2001 is closing out as a year of few sweet notes as the industry is also being hit by a lack of blockbuster pop music releases. “It looks like it will be another year of flat CD sales and I think to some degree that’s got to be attributed to the fact that there’s so much music available online,” Tom Adams, president of entertainment industry research and consulting firm Adams Media Research said. “I also think (the price cutting) is also as much to do with the fact that the economy is terrible and holiday sales were off overall,” he said. Advertisement Alternative media such as the increasingly popular DVDs also successfully won consumer interest, dampening sales of other entertainment products, analysts said on Thursday. Adams said the music industry may not know the full extent of the piracy impact on CD sales since many music-swapping services have opted to discard single servers, which allowed better monitoring of online traffic in the days of Napster. Although the the once popular music copying service Napster service has been idle since July, analysts say the Internet song-swapping has just kept evolving, pushing retailers and recording companies into the cold. BLOWOUT PRICE CUTS Just to show how edgy the retailers have become, popular music retailer HMV already has a sale offer on its Website dubbed the ’02 Blowout Sale’, while rival Virgin — part of Richard Branson’s Virgin Entertainment Group — calls its markdown blitz, the Red Sale. Virgin, which has a megastore in New York’s Times Square, is offering CDs priced as low as $3.99, with more other popular hits priced at $9.99. Discounts of up to 80 percent is a far cry from the average prices of newly released CDs of $17.99 to $14.99, a step which analysts said is bound to stifle profits for both retailers and recording companies. “The record company is going to make their profit one way or another on a per CD basis, but they need to reevaluate their business model on the whole because it’s clear that these free online services have eviscerated a large part of their market,” said Kenneth Freundlich, an entertainment attorney in Los Angeles. Basically, if a CD sells for $13, a record company takes in about $8, of which it deducts artist, publishing royalties and manufacturing, promotional and marketing costs. The artist generally makes between 50 cents and 75 cents per CD, while the record company clears between $3 and $4 per CD. The artist further has to pay back advances made by the record firm, which further cut the artists’ royalty, often dwindling to nothing, according to music industry insiders. STANDARD PRICE AT $9.99 “(We) believe music software CD prices may soon permanently decline to $9.99 given weak sell-through of new artists and continued Internet piracy that appears unstoppable,” Peter Caruso, a retail analyst at Merrill Lynch said. “This should force a shakeout in the music retail business,” he added in a research note. Adams, at Adams Media Research, said the music industry was also not being helped by its slow transition into full subscription online music services. “I think we are in for a slow transition to a very different model for the audio distribution business where a lot more happens online through legitimate services like those being launched now,” said Adams. “I think that will be a growth business which ends up generating revenues for rights holders and probably to some extent at the expense of CD sales,” he added. Among the recently launched legitimate online music services is Pressplay, an online music joint venture between Sony Corp. and Vivendi Universal. Pressplay’s debut on Dec. 19 came on the back of a test launch for a similar service called MusicNet, backed by big record labels, including AOL Time Warner’s Warner Music Group, Bertelsmann AG’s BMG Entertainment, and EMI, along with Internet media delivery service RealNetworks Inc.. EMI owns a 43 percent stake in British books and music retailer HMV Media Group.
So... We could theoretically buy an online CD directly from artists for $1, insuring their continued success and reducing the middle-man's cut from 95% to 0%?
Ah, distribution is the key. Most artists would really rather sell you a CD themselves but it wouldn't be for a dollar. Maybe $3 or even $5 would be reasonable. In fact, there are TONS of places throughout the internet where you can buy CD's from independent artists for that - but most people don't so bands are forced to try and get signed. Consider that 1000 CD's shrik wrapped with the bar code (which is nearly $1000 all by itself) comes to around $1700. Add to that, let's say, $5K-$6K in recording costs (that's on the low end) and maybe $1K for artwork. You could get out for under $10K for a decent, locally produced CD. Now, would it sound as good as a record done with a $150K budget? Of course not. It probably won't even come close. I know. I make independent CD's in my studio and I can't compete on a level playing field with the RIAA. So, unless everyone here wants to... Root through GarageBand.com or MP3.com or some other independent artist site for music... <b>AND</b> Be willing to suffer through pretty crappy production most of the time... <b>AND</b> Realize that you'll never hear it on the radio and will very likey never see the artist in person... Until everyone is ready for that, we're stuck with the RIAA.
COGS, or Cost of Goods on a music CD is actually under $1. As for the split, I see the same thing in the Games industry, the people with the Jack, keep the jack...get it? DaDakota
<B>Consider that 1000 CD's shrik wrapped with the bar code (which is nearly $1000 all by itself) comes to around $1700. Add to that, let's say, $5K-$6K in recording costs (that's on the low end) and maybe $1K for artwork. You could get out for under $10K for a decent, locally produced CD. Now, would it sound as good as a record done with a $150K budget? Of course not. It probably won't even come close. I know. I make independent CD's in my studio and I can't compete on a level playing field with the RIAA. </B> Here's the key -- it appears to me that the RIAA is then providing a valuable service and thus charging a commission for it. I don't know if they are gouging their clients. However, if they are, it seems like there's a very good potential market for someone with $$ to come in and provide RIAA services at much lower commission rates. If there's so much profit involved, someone who was willing to share a bit more with the artists could grab basically every big name artist out there and develop a business fairly easily.
That really depends on who is producing the CD. If you are pressing half a million copies, you probably can get that deal. However, since most bands can't spend $300,000 on half a million CD's, let alone sell all of them, the cost to the labels is irrelavent if you are talking strictly a comparison between what musicians can do and what the RIAA can do. Also, did you take into account ALL the expenses - session musicians, producer, engineer, caterer, marketing, recording studio, equipment rental, photography, artwork, etc, etc, or are you just talking about the hard costs of reproducing a CD, i.e. pressing, shrink wrapping, etc.?
You are missing one issue which is a biggie. Most of the companies who own the labels are media conglomerates. They own most of the TV and radio stations as well as much of the print media. Add to the list of owership CD duplicators, movie studios, video and audio production houses, distributors, producers (who are on the payroll), touring promoters and all the big time sponsors as well - soft drink companies, etc. There are really only 6 major labels - they call them the big 6 - BMG, Sony, WEA, CEMA, Polygram, and MCA. They own EVERYTHING and basically every record label. If they don't own all the label that produces a record, they do the distribution and marketing for them. There are very few independents left (they all got bought up in the early 90's) and those that are cannot ever get to large or they get squashed. At the moment, Cash Money Records is the only one that really stands out as a major independent. Compare that to the mid 80's (before the majors consolidated) and there were like 50 or 60 fairly sizable independents. The other problem is that the big name artists don't get the same deal. Stars get much more lucrative deals because they are able to negotiate better deals. They aren't the one's that suffer under this system. In some ways, the system supports them because they have built-in sponsors and support. You are right about the basic definition of what they do. The problem is there isn't anyone out there who could do what they do because the big 6 control the system. That's the big problem.
Jeff, Cost of goods is just the hard costs associated with the PRINTING of the CD and packaging. The other costs are considered development costs. They get recouped first out of sales. DD
Da: That's what I figured. The problem is, if you are producing it yourself, you have to consider all those costs up front. You recoup EVERYTHING from sales including the cost of printing CD's. Most of us don't have the kind of money needed to not just make and distribute a record, but promote it as well.
Jeff--I could have sworn Cash Money was part of Universal. And their sales have been in a major slump lately.
Are they part of Universal or just distributed by them? You probably are right. I don't know a ton about the rap market.
